Tax Credit Programs
Federal Low-Income Housing Tax
Credit (LIHTC) Program
Overview
The Connecticut Housing Finance Authority (CHFA)
administers the federal Low-Income Housing Tax Credit
(LIHTC) program for housing developments in the state of
Connecticut. The LIHTC program is contained within § 42 of
the
Internal Revenue Code
(26 U.S.C. § 42) as a tax incentive program to
stimulate investment in affordable housing.
The LIHTC program provides incentives for developers to
acquire, rehabilitate and or build low- or mixed-income
housing through the allocation of federal tax credits that
can be used to reduce a project’s federal taxes or sold to
corporations or investor groups to raise equity for a
project. The credits are purchased at a discount and
represent a dollar-for-dollar reduction of tax liability.
In Connecticut, the LIHTC program plays a vital role in
the creation and preservation of affordable rental housing
by increasing the funding available to eligible projects
that best meet the state's goals and requirements for
affordable housing. (See,
Qualified Allocation Plan.)
Follow the links below
to learn more about the LIHTC program.
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Who can apply for Low-Income
Housing Tax Credits?
Developers and owners of qualified low-income housing may
apply for Low-Income Housing Tax Credits.
Successful applicants:
- acquire, substantially rehabilitate, and/or
construct residential rental developments that provide a
percentage of affordable units for occupancy by
low-income individuals and families.
- assemble a development team (owner, development
consultant, management agent, contractor and architect)
that meets the experience and licensing requirements
established by CHFA.
- comply with
Section 42
of the Internal Revenue Code, regulations,
administrative documents, and all relevant material
published by the IRS.
Please note: Before applying, developers
are encouraged to seek the assistance of a housing
consultant, an attorney and/or an accountant to verify
compliance with all LIHTC program requirements.
What types of housing
developments are eligible to receive Low-Income Housing Tax
Credits?
In order to be eligible to receive Low-Income Housing Tax
Credits (LIHTC), housing developments must meet specific
criteria set forth in
Section 42 of the Internal Revenue
Code as well as in CHFA’s Qualified Allocation Plan (QAP).
- Eligible developments must provide
residential low-income rental housing.
Projects that acquire, substantially rehabilitate, and/or
construct residential rental housing to be occupied by a
percentage of low-income individuals and families may be
eligible to receive LIHTC awards.
Conversely, hospitals, sanitariums, nursing homes,
retirement homes, mobile home parks, and life care
facilities (excluding certain Assisted Living proposals)
are not eligible for LIHTC.
- Projects must meet "Minimum
Set-aside" requirements
A "minimum set-aside" represents the lowest percentage
of a development's housing units that meet
HUD-defined low-income and rent restrictions
applicable to the geographic areas.
In order to be eligible for LIHTC, development owners
must agree to one of two “minimum set-aside” provisions.
- LIHTC 20-50 Minimum Set-asides - Very Low Income
Tenants
At least
20% of the development's units must be rented to
tenants earning no more than 50% of the
area median
income (adjusted for family size) as established by HUD.
The remaining units
may be rented at market rates.
-
LIHTC 40-60 Minimum Set-asides
At least 40% of the development's units must be rented
to tenants earning no more than
60% of the area median income
(adjusted for family
size) as established by HUD. The remaining units may be
rented at market rates.
This set-aside requirement remains in place throughout
the compliance period of 15 years and an extended use
period, which typically totals over 30 years.
What size tax credit is a
development eligible to receive?
The amount of tax credits a development is eligible
to receive under the Low-Income Housing Tax Credit
(LIHTC) program represents a fixed percentage of certain
costs of developing low-income housing and the number of
units that will meet federal rent and income targeting
guidelines. Other factors that are considered include,
but are not limited to, the amount and source of
financing available for a project.
Generally, new construction projects and substantial
rehabilitation projects may qualify for 9% Tax Credits, as
long as they are not funded with federal Tax-Exempt Bonds
and are otherwise eligible. On the other hand, projects
that involve acquisition and substantial rehabilitation
expenditures and are funded with Tax-Exempt Bonds may only
qualify for 4% Tax Credits.
A development receives all of the tax credit equity
during the construction period, while investors claim the
tax credits annually over a ten year period. The credits
are used to reduce federal tax liability on a dollar-for-dollar basis.
How do Developers apply for Low-Income
Housing Tax Credits?
Developers may apply for Low-Income Housing
Tax Credits by mailing or hand-delivering a completed copy
of the
Consolidated Application to:
Mailing Address:
Connecticut Housing Finance Authority
Attn: Tax Credits
999 West Street
Rocky Hill, Connecticut 06067-4005 |
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What is the application deadline
for Low-Income Housing Tax Credits?
The application deadline differs depending upon the type of
LIHTC
being applied for:
- 9% Low-Income Housing Tax Credits
There is a limited pool of 9% LIHTC.
This means that developers must apply during
CHFA-specified 9% LIHTC funding rounds and be rated and ranked
based upon how well their projects meet the priorities
and selection criteria set forth in CHFA's
Qualified
Allocation Plan (QAP.) The top scoring applicants (as
judged by CHFA) are awarded 9% LIHTC.
To be included in the current funding round, all application packages must be received by CHFA no later than
(Date To Be Announced) |
- 4% Low-Income Housing Tax Credits
4% LIHTC are allocated on a non-competitive
basis to developments that utilize Tax-Exempt Bonds as a
component of their financing. Because 4% LIHTC are
awarded on a non-competitive basis, developers may apply
for 4% LIHTC at any time. Common practice is for developers to
apply for 4% LIHTC in conjunction with Tax-Exempt Bond
financing.
(See Also,
News and Announcements for "Notice of Funding Availability"
bulletins advertising periodic Tax-Exempt Bond financing opportunities.)
Is training available on the Low-Income Housing Tax Credit
program?
Generally, CHFA offers two to three LIHTC
training sessions prior to the funding round each year.
Training sessions will be announced under
News and
Announcements for Developers and Sponsors. Developers
interested in receiving email updates regarding LIHTC
training should contact
doris.vitali@chfa.org to be added to our email list.
What else
should developers know about
Low-Income Housing Tax Credits?
The following additional considerations and restrictions
apply to the LIHTC Program.
- Developments receiving Tax-Exempt Bond
financing may still be eligible for federal Tax
Credits.
Developments that receive Tax-Exempt Bond financing
from local, state or federal governments may still
qualify for 4 % LIHTC awards.
- A single development can qualify for
both 9% and 4% Tax Credits.
If a development includes building acquisition, it
may be eligible for 4% acquisition tax credits in
addition to 9% tax credits for rehabilitation
expenditures.
- Eligible developments must make a
minimum long-term commitment to provide low-income
housing.
LIHTC requires that a development provide
low income housing for a compliance period of 15
years starting with the first year of a building’s
ten-year credit period.
- Tax Credits allocated to developments
must not exceed the amount necessary to assure the
development’s feasibility.
The housing credit dollar amount allocated to a
building that is a part of a qualified low-income
housing project must not exceed the amount CHFA
determines is necessary for the financial
feasibility of the development throughout the
compliance period.
- The Tax Credit Period begins when a
building is placed in service or the next year.
Under LIHTC, the credit period of ten taxable years
for any building that is a part of a qualified
low-income development begins on the taxable year in
which the building is placed in service, or the
succeeding taxable year if the taxpayer chooses.
- Ten percent of all 9% Tax Credits are
reserved for non-profits.
Under LIHTC, ten percent of the tax credits
available in Connecticut are reserved exclusively
for developments sponsored by non-profit
organizations. Applicants under the non-profit
set-aside will be rated and ranked only against
other non-profit applicants.
Questions?
Contact CHFA.
Please direct questions and comments related to the
LIHTC Program to the “Multifamily Underwriting”
department of the Connecticut Housing and Finance Authority.
Mailing Address:
Connecticut Housing Finance Authority
Attn: Tax Credits
999 West Street
Rocky Hill, Connecticut 06067-4005
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Additional
Information
The following files and documents are related to the
Federal Low-Income Housing Tax Credit Program
| Related Documents |
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| File | Size | Type | 2010 Qualified Allocation Plan signed by Governor Rell
This is the Qualified Allocation Plan (QAP) for Connecticut as required by the federal Low-Income Housing Tax Credit ("LIHTC") Program for the allocation of housing tax credits to promote an expansion of low- to moderate-income rental housing in the state by establishing the guidelines and procedures for the acceptance, scoring and competitive ranking of LIHTC applications and the administration of the program. | 2049K | pdf |
| 2010 Standards of Design and Construction
2010 Standards of Design and Construction | 2014K | pdf |
| 2011 DRAFT Qualified Allocation Plan (QAP)
This is the Qualified Allocation Plan (QAP) for Connecticut as required by the federal Low-Income Housing Tax Credit (“LIHTC”) Program for the allocation of housing tax credits to promote an expansion of low- to moderate-income rental housing in the state by establishing the guidelines and procedures for the acceptance, scoring and competitive ranking of LIHTC applications and the administration of the program. | 309K | pdf |
| CHFA - Qualified Allocation Plan 2009
This is the plan for Connecticut required by the federal Low-Income Housing Tax Credit ("LIHTC") Program for the allocation of housing tax credits to promote an expansion of low to moderate income rental housing in the state by establishing the guidelines and procedures for the acceptance, scoring and competitive ranking of LIHTC applications and the administration of the program. | 245K | pdf |
| CHFA – Standards of Design and Construction 2009
This guide sets forth the 2009 requirements of state and local building codes, CHFA standards of design and construction, as well as guidelines of the national and regional green residential rating system for multifamily housing financed through CHFA | 572K | pdf |
| CHFA-DECD Consolidated Application - Downloading/Unzipping Instructions
This files contain instructions on how to save, unzip, and open the Consolidated Application. Users who are unfamiliar with the concepts of "zipping" and "unzipping" files should read this document prior to downloading the Consolidated Application. | 6K | pdf |
| CHFA-DECD Consolidated Application - Version 2.3
This application is used by Multifamily Rental Housing Developers to apply for funding from CHFA and/or DECD. Download this file and extract its contents onto your computer. Once extracted, open the "Consolidated Application - Start Here" pdf file. (PLEASE NOTE: This file is stored in "ZIP" format. Older versions of Windows may need a separate utility to open/extract zip files, like WinZip or IZArc. IZArc can be downloaded for free at http://www.izarc.org) | 7199K | zip |
| Governor Signs Bill that expands the HTCC Program Set-Aside for Supportive Housing Initiatives
The Governor Signs Bill | 19K | pdf |
| LIHTC - 2009 Allocations
This chart lists the housing projects that received 2009 federal Low-Income Housing Tax Credits. | 113K | pdf |
| LIHTC - 2009 Presentation
This Microsoft Power Point presentation provides an overview of the Low-Income Housing Tax Credit program. | 1421K | ppt |
| LIHTC - 2010 Presentation
This PowerPoint presentation provides an overview of the Low-Income Housing Tax Credit Program. | 1481K | ppt |
| LIHTC – Cost Certification Submission Form
The LIHTC Cost Certification determines the amount of recognized eligible basis and also determines whether the initial tax credit allocation amount still qualifies for a housing project. | 94K | doc |
| LIHTC – Glossary of Terms
This is a glossary of terms related to the Low Income Housing Tax Credit (LIHTC) Program. | 24K | pdf |
| Low-Income Housing Tax Credit Program Procedures
These procedures set forth the eligibility requirements for non-profit corporations applying for tax credits under the Federal Low-Income Housing Tax Credit program. | 73K | pdf | | File | Size | Type |
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